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U.S. Supreme Court strikes down law restricting data mining for marketing purposes

In the final days of its last term, the U.S. Supreme Court struck down Vermont’s Prescription Confidentiality Act, which restricted data mining of physician prescriber records for drug marketing purposes. Despite urging by the state of Vermont, 35 state attorneys general, the U.S. Department of Justice, privacy advocates, and others, a 6-3 majority of the Court joined in overturning the statute. Declining to apply the intermediate scrutiny test used in past commercial speech cases, the Court instead applied the heightened scrutiny test reserved for government restrictions that are based on the content of the speech or the viewpoint of the speaker.

It has long been established that truthful commercial speech is generally protected by the First Amendment. In Sorrell v. IMS Health, the Supreme Court found that Vermont had imposed an impermissible burden on protected expression by selectively burdening the sale, transfer, or use of personally identifying information used for marketing communications.7 The ruling emphasizes that a governmental desire to protect people from persuasive speech, such as effective marketing, is not a lawful basis for restricting truthful commercial speech. Sorrell clarifies that legislative proposals seeking to regulate commercial data practices, including marketing and advertising activities, face high constitutional hurdles.

Case Background

Vermont’s Prescription Confidentiality Act, passed in 2007, sought to restrict the sale, disclosure and use of records on the pharmaceutical prescribing practices of individual doctors. Pharmaceutical companies use such data, stripped of patient identifying information, to improve and target their marketing to physicians. In relevant part, Vermont’s statute provided that, subject to certain exceptions including the doctor’s consent, pharmacies could not sell or use prescriber data for marketing. The law also banned drug manufacturers from using such data for marketing. Vermont offered several rationales for these restrictions, including privacy justifications and a concern that effective prescription drug marketing is not in the best interests of patients or of the State, which bears the burden of increasing health care costs. Data mining companies and drug manufacturers challenged the law, which was upheld by the trial court but overturned by the Second Circuit Court of Appeals.

U.S. Supreme Court Decision

Subjecting the law to “heightened scrutiny”

Justice Kennedy, writing for the Court, concluded that the Vermont law raised First Amendment concerns because the State sought to restrict the availability and use of prescriber data based on (1) the identity of the recipient (pharmaceutical manufacturers) and (2) the content of the recipient’s speech (marketing purposes).8 Because Vermont’s restrictions disfavored certain speakers and content, the Court found that the law should be examined under a “heightened scrutiny” standard. To survive such heightened scrutiny, the government would have to show that the restriction directly advances a substantial government interest and is drawn to achieve that interest.9 The Court ruled that Vermont’s law did not satisfy this standard.

Vermont’s privacy rationales were not persuasive

Vermont first argued that its law was needed to protect medical privacy, including physician confidentiality. The Court found that the statute was not drawn to serve these interests because it permitted widespread sharing of data with all but a “narrow class of disfavored speakers.”10 The Court noted that a more comprehensive ban on data sharing would present a different question.

The Court further found that the statute’s provision allowing data sharing with the prescribing physician’s consent did not save the statute, because it merely allowed a limited degree of privacy on terms favorable to certain speech preferred by the government.11 For the same reason, the Court noted that reversing the law’s default so that physicians would have to agree individually to the data restrictions also might not make the law constitutional. 12

The Court dismissed Vermont’s arguments that the law was needed to protect physicians from harassing marketing visits and because the use of prescriber data undermines the doctor-patient relationship by influencing treatment decisions. The Court stated that “the fear that speech might persuade provides no lawful basis for quieting it.”13 Similarly, the Court likewise rejected Vermont’s proffered goals of improving public health and reducing healthcare costs, concluding that Vermont may not “burden the speech of others in order to tilt the public debate in a preferred direction.”14

Implications for privacy regulation

In closing, the Court spoke to the ongoing public debate over privacy regulation, stating that “[t]he capacity of technology to find and publish personal information, including records required by the government, presents serious and unresolved issues with respect to personal privacy and the dignity it seeks to secure. In considering how to protect those interests, however, the State cannot engage in content-based discrimination to advance its own side of a debate.”15

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Compare jurisdictions:Life Sciences: Product Regulation and Liability

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